Rebound in July lending figures ‘only reverses half decline in previous month’

Analysts are predicting that the rebound in July mortgage lending reported by the Bank of England last week will be short-lived.

The number of loans approved for house purchase increased by 7.2 per cent in July but the figure is still 6.7 per cent down on the six-month average.

In July, there were 47,312 loans approved for house purchase, with a value of £7.1bn compared with 44,124 the month before, with a value of £6.7bn. The six-month average stands at 50,729.

The number of approvals for remortgaging increased by 5 per cent from 24,039, worth £3.4bn, in June to 25,273, worth £3.4bn, in July. The number of remortgage approvals in July was also lower than the six-month average, at 28,649.

Gross lending secured on dwellings was £11.5bn in July compared with the previous six-month average of £12.1bn. Repayments in July were £10.9bn compared with the previous six-month average of £11.5bn.

But Capital Economic says that the rebound in July was expected, given the special factors weighing down on activity in June such as the two bank holidays.

The monthly gain only reversed half the previous month’s decline and with newly agreed sales close to a four year low, this improvement is likely to be short-lived.

Capital Economics UK economist Samuel Tombs says: “While the number of mortgages approved for new house purchase rose from 44,124 to 47,312, this only reversed about half of the fall in June and left approvals still some 8 per cent below the average level seen in the previous twelve months. Meanwhile, bank lending also reversed only part of the fall in June.

“Looking ahead, credit might have become easier to obtain now that the Funding for Lending Scheme is up and running. That said, the scheme has not prevented some lenders from increasing their borrowing rates recently. Indeed, we think that weak money and credit growth is likely to act as a brake on the economy for some time to come.”